China has been coming hard over regulations on some of the biggest software names in its region and this continuous pressure from Beijing has led to Asia’s hardware technology stocks getting back in the spotlight.
According to sources, the MSCI Asia Pacific Information Technology Index which features the likes of Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. jumped 3.2% this week. However, the MSCI Asia Pacific Communication Services Index whose biggest members include consumer Internet giants such as Tencent Holdings Ltd. fell for the third week. The overall numbers tumbled almost 12% in July, which is the worst monthly performance since 2008.
Many analysts claim that the increase in the divergence between the two sectors is mostly due to the outcome of Beijing’s effort to reshape its technology industry by reining Internet behemoths who seem to pose a threat to the financial and social stability of the country.
And recently after the initialization of the trade war with the U.S, china is hell-bent on establishing its semiconductor independence and use advanced manufacturing to power its economy. This however has resulted in offering some big long-term positives for the region’s leading hardware firms.
“Part of the attraction of hardware tech has been that there is visibility and outperformance in the latest round of earnings that we have seen. Until the regulatory uncertainties clear up, there is probably little likelihood of consumer tech outperforming.”
The conditions brought forth by the pandemic and the supply chain disruptions and growing automation helped TSMC briefly dethrone Tencent as Asia’s most valuable company earlier in the week. Tencent, on the other hand, took its year-to-date loss to 20% mostly due to the fears that Beijing’s escalating regulatory assault may see its next target in the world’s largest gaming arena.
Semiconductor Manufacturing International Corp. Also surged as most as 30% in Hong Kong over the past two weeks, on the other hand, TSMC and Samsung predicted the robust demand growth of their key products.
“Amid the Chinese regulatory tightening on Internet companies and government support for the semiconductors industry, chipmakers are a safer bet than Internet giants.”
Event the Alibaba Group Holding Ltd. which released its quarterly sales has missed its estimates for the first time in more than two years. This shows the impact of the crackdown on consumer tech companies by the Chinese administration.
